For over half a century I have worked as an investment banker, and then written about Wall Street, highlighting the market upheavals of 1973-4, 1987, 1999-2000, and 2007-2008 and their ramifications for the American economy,the disparity of wealth in the nation and the continuing risks of another deep global financial crisis.

Previously I was National Editor and Senior Editor at Forbes Magazine, New York Bureau Chief of The Boston Globe and Wall Street correspondent of The Economist.

You Cannot Trust The Public Reports Of Deutsche Bank, The Largest Bank In Europe

On the fourth anniversary of the Dodd-Frank legislation that was meant to ensure the safety of Wall Street, we learn that for twelve long years since 2002 neither investors, nor regulators, nor the financial media could trust or rely on the reports that the Deutsche BankDeutsche Bank was filing about its earnings, its capital or its competitive position in the hierarchy of banks.

Just think of all the borrowers, savers, traders and government officials who thought they could count on the facts and the numbers presented by the number one bank in Germany about its profits, its capital resources, the way it accounted for bad loans, etc. What we are being told by the New York Federal Reserve Bank is that its “Internal Audit functions” are “inadequate and ineffective.” That the limitations of its information technology systems “expose the firm to significant operational risk and misstated regulatory reports.”

What irks me is that the New York Fed has known about this horde of “significant weaknesses” for over a decade and has done nothing to alert the public to the dangers of making financial decisions based on what the largest bank in Europe has been reporting since 2002. Just imagine that was true of J.P. MorganJ.P. MorganChaseChase or Goldman Sachs or Bank of America. There would be hell to pay. There might be huge fines. Heads would roll, certainly in the chief financial officer’s operation.

Herewith is a list of the sins of Deutsche Bank: “a disjointed and inadequate regulatory reporting infrastructure; inadequate monitoring functions; insufficient breadth and depth of regulatory reporting training; limited accountability policies; and material errors and poor data integrity.” By the way DB’s Senior Management told the Fed all these issues had been reformed and resolved. Yet, there have been some 800 manual adjustments of the financial reporting process that in total involved some $337 billion.

I always thought that Germans were supposed to be more efficient than Americans. But, in the case of Deutsche Bank, it cannot be true. Here’s the Fed on DB’s vacuum in the reporting function. “Lastly, the firm (DB) does not have the capability to effectively implement the new complex reporting requirements,” the Fed has decided. Naughty, foolish, incompetent Deutsche Bank. My God, what must the short sellers be telling each other?

This embarrassing manual shifting of $337 billion in 800 manual chess moves is not chicken feed. No, as the Fed’s letter to the bank posits “These adjustments require substantial resources, lack transparency and do not allow for sufficient time to effectively review and analyze the data, prior to filing with the FRBNY (The Federal Reserve Bank of New York).” Actually, the worst item in this horror story, to my way of thinking, reports that DB lacked documentation about the very point of origin of transactions. We’re talking about a bank that doesn’t know what it’s doing. That can’t record accurately on a real time basis its transactions. That doesn’t even know about these gaps in its reporting control system. I tell you: I’m just as happy I didn’t know all this in 2008. My level of systemic anxiety could not have taken it.

So, we now know that Deutsche Bank was in a non-complying state of its own while Citigroup and Bank of America were becoming insolvent as 2007 became the great meltdown of 2008. As William Dudley, President of the New York Federal Reserve Bank, put it so aptly; “Our view into the operation of global banks was too limited due both to the shortcomings of the banks in aggregating internal information and the differences in sharing information globally.” Deutsche Bank’s shortcomings lay in its inability to share the right information or all the necessary information at a moment of sheer crisis. What an incredible revelation.

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